This chapter is from the book

In the 2002 movie Minority Report, Tom Cruise walks into a mall and is greeted by “live” billboards that address him by name and show him outfits he will likely be interested in. The billboards do it by scanning his retina. (Turns out it’s someone else’s retina, but you’ll have to watch the movie to know why.)

In many ways, as advertising has gone from traditional media to new media, it has not changed very much. When I was growing up, my first exposure to advertising was posters on walls everywhere I went and a few large billboards advertising everything from toothpaste to cars. The idea of marketing via posters was simple: Buy enough of them at the lowest possible price per poster and get them out in as many places as possible. It was about two things: volume and price. Advertisers sought the highest possible volume at the lowest possible price. Brand managers were taught in business school that it was all about coming up with a clever tagline or jingle and trying to get as many people to see and hear it as possible.

Along came newspapers, magazines, and TV—first one channel in black and white and then three channels and then cable with hundreds of channels. The same sort of growth happened with radio.

Marketers repeated the same formula used in advertising. To be sure, creative agencies came up with more clever ways to get the message across and also utilized new media like video for TV commercials and audio for radio, but the idea remained the same: Get your message out to as many people as possible for the lowest possible cost.

Despite dramatic advances in digital media, devices, and new types of media like social media, most digital ads today don’t look very different or behave any differently than the billboards that have been around since the beginning of advertising. Display banner ads are simply sized-down versions of those billboards. And they’re only about as effective as billboards, judging by the click-through and engagement rates that display banners are delivering to brands.

Digital media presents immense opportunities to not only make significantly more functional billboards but also smarter billboards that understand consumers’ interests and tailor advertising and messaging directly to their needs. This is a largely untapped opportunity for marketers.

For some time, pundits have predicted that advertising will become much more personalized and relevant. While we don’t quite have billboards scanning our retinas, it seems clear that a big wave of personalization driven by the vast amounts of data we now have is about to sweep through all of marketing.

Several factors have come together in recent years to create this inflection point—some technological, some consumer behavioral changes, and some to do with the widespread use of social media. These advances have made it possible to embark on personalizing marketing inexpensively and at scale.

Mobile Devices Become Personal Media and Sharing Devices

The biggest change in consumer behavior has been a greater willingness to share personal information. Social media has accelerated this trend, and people now share online anything and everything, including who their friends are, their likes and dislikes, where they live, where they’ve visited, what they’ve said, and what they’ve watched. This is a big cultural and perhaps generational shift in thinking to a general openness to sharing personal information in return for a more personalized experience.

Many years ago, people worried about others tracking them and knowing exactly where they were. Today we freely let apps like Uber, OpenTable, Yelp, and others use our location to help us quickly get a car service, make reservations, or find a restaurant nearby. We even deliberately “check in” in many mobile apps, telling everyone where we are. Many years ago, we worried about video rental information getting into the wrong hands. Today our Facebook and YouTube pages are filled with video content we watch and let the world know we watch. In some cases—as with Uber, OpenTable, and Yelp using location information—users get something in return for their sharing; but even in cases where they don’t seem to get anything, users seem more than willing to share information about themselves.

The rapid proliferation of mobile devices has essentially served to personalize our digital media consumption. Instead of a family sitting around a TV, we now have our own personal palm-sized TVs available all the time. Rather than huddle around a radio, we each have a Pandora account to listen to our own tunes (nobody needs to know you secretly listen to ABBA). Now that we can watch whatever we like on Netflix, there’s no more fighting over the TV remote.

Such technological change has spurred the movement toward more personalized experiences for users. In addition to mobile devices becoming personal media devices, they have also quickly become “sharing devices.” Through the use of social media, these devices have unleashed a torrent of location, preference, and other kinds of data volunteered by users. This data has become a treasure trove that marketers can use to personalize experiences.

Recently, the explosion of connected devices variously called “wearables” or “the Internet of things” is creating vast amounts of personal data that adds to the arsenal of data that marketers now have to work with.

Computing power and bandwidth have also increased to a point where tasks that used to take several minutes to hours—like executing an algorithm to match a user to his or her user profile—can now be done in milliseconds. Cloud computing capabilities have also significantly reduced the costs of storing, retrieving, and processing the massive amounts of data needed to effectively personalize advertising.